Scottish politics are getting very murky indeed. First, the UK government suddenly rushes out a White Paper about awarding Holyrood extra taxation and other powers along the line of the Calman report ( extract below the fold). In principle this was agreed by all pro unionist parties in Westminster and Holyrood. But there are two catches. First Camerons Conservatives refused at the last minute to go along with the Labour proposals for obvious political reasons, although George Osborne pledged in the Scotsman to produce similar Tory plans if/when in government. Catch 2: Labours Scottish borrowing powers would be limited by the amount Holyrood could raise in extra taxation i.e the borrowing would have to be fully funded. The aim is to make Scots responsible for the extra cost of things like no uni fees and free health care for the elderly and stop them trying to blame London for the shortfall. Nats and others would say this places an extra burden on the Scottish taxpayer that other UK taxpayers would not bear. Although this isn’t yet acknowledged, the plan puts in question the whole house of cards that is the Barnett formula for regional spending. But there’s a far more urgent point. Who in their right mind would want to take on separate Scottish taxes when they don’t know what the UK burden will be, other than higher than today? No deal is expected until 2012 at the earliest so the theme will be the counterattraction to independence, and will occupy what had been up to now a clear field for the SNP.
The low politics of the move is that it’s a spoiler against the SNP minority governments own White Paper outlining an independence strategy on Monday, St Andrew’s Day. Theres a catch here too. The SNP paper will not contain the wording of an independence referendum question or questions. Finally, the unionist parties in Holyrood refuse to back SNP plans to set a low limit on the price of drink for all sorts of reasons, most of them involving a game of political poker. The SNP insist they have to so it this way because they dont set the duties on alcohol. Westminster does, and will continue to do so. Who ever said devolution was easy, even without a Troubles legacy?
From the Herald report
Under the plan, the UK income tax rate would be cut by 10p in Scotland with a corresponding cut in the annual block grant from the Treasury. To maintain
the current budget of £30 billion, Holyrood would have to impose a new Scottish income tax at 10p. This would give it about £4.5bn in spending power. If it wanted more money it could raise this level; a cut would reduce its income.
As well as pledging to transfer other taxes like stamp duty, the Government also backed giving Edinburgh capital borrowing powers but with serious strings attached.
The Treasury would set the limits while taking into account local council borrowing. Moreover, any borrowing would be financed by increasing taxation in Scotland above the level of the rest of the UK, ie, through the new Scottish income tax. There is no borrowing free lunch, one Whitehall source noted.